Existing home sales surged in September, bringing sales to the highest point since 2007. At the same time, the Department of Commerce just reported that sales of new single family homes fell 3.6% in September to an annual pace of 402,000 units.
Sales of both existing and new homes had been on the rise of late, encouraging many an economist that the worst is behind us. Some will say that the new home sales numbers show that this will be a shakier recovery than in past recessions.
That may be true, but keep in mind that home sales as a whole are up by a pretty large margin. Those sales are helping bring down the inventory of unsold homes, which is so vital to returning to sustainable times.
Analysts had expected new home sales to rise to 440,000 units, most likely based on the final push of first-time buyers looking to take advantage of the $8,000 tax credit that expires at the end of November.
We would expect new homes sales to continue to decline over the next month or two before picking up again. The reason is the expiration of the tax credit.
Buyers looking at new homes will find some homes that are already completed and those that are not yet finished. First-time buyers, which account for nearly 45% of the buyers at the moment, are looking to eliminate any possible risk of missing out on the credit. Purchasing a home still under construction without a guarantee of closing before November 30th will push many would be new home buyers to existing homes.
The numbers may already be bearing this out. In September, sales of existing homes jumped 9.4% to an annual rate of 5.57 million. This is the highest rate in more than two years.
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